Permits, Filing Requirements & Local Option Sales Tax
On May 30, 2018, Iowa Governor Kim Reynolds signed Senate File 2417 (SF 2417), an extensive state tax reform bill to improve the tax structure in Iowa. This law modernizes and expands the types of businesses required to collect Iowa sales tax and local option sales tax. Specifically, marketplace facilitators and remote sellers that exceed a certain amount of revenue or transactions must charge Iowa sales tax and applicable local option sales tax the same as retailers with a physical presence in Iowa.
Who is required to have an Iowa sales tax permit?
The following types of businesses must get an Iowa retail sales tax permit and file sales tax returns:
- Retailers with a physical presence in Iowa
- Remote sellers that have $100,000 in gross revenue from Iowa sales or make 200 or more separate sales transactions into Iowa
- Marketplace facilitators that make or facilitate $100,000 or more in Iowa sales or make or facilitate Iowa sales in 200 or more separate transactions
What about Iowa retailers, remote sellers, and marketplaces that never make taxable retail sales?
A business does not need to get an Iowa sales tax permit or file Iowa sales tax returns if the business does not make any taxable retail sales.
Example: Retailer A only makes retail sales of unprepared food that is exempt from Iowa sales tax. Retailer A does not sell any other products or services that are subject to Iowa sales and use tax. Retailer A is not required to obtain an Iowa sales tax permit or file Iowa sales tax returns.
If these businesses begin making taxable retail sales in Iowa, they must collect sales tax and applicable local option sales tax, get an Iowa sales tax permit, and begin filing Iowa sales tax returns.
Local Option Sales Tax
Retailers (including remote sellers) and marketplace facilitators required to have an Iowa sales tax permit must collect state sales tax and applicable local option sales tax on all taxable Iowa retail sales.
Retailer’s Use Tax Permit
The sales and use tax collection provisions of SF 2417 require many sellers who currently have a retailer’s use tax permit to obtain a sales tax permit instead.
Remote sellers and marketplace facilitators whose Iowa sales volume is below the amount required to collect sales tax may use a retailer’s use tax permit.
What if I have a retailer’s use tax permit, but SF 2417 requires me to collect Iowa sales tax?
These sellers should cancel their retailer’s use tax permit by completing a request to Cancel A Permit. These sellers should also apply for a new retail sales tax permit with Online Permit Registration.
After you have completed your sales tax registration request, retain a copy for your records. You may begin to collect tax immediately; your copy will serve as the proof of registration until you receive your permit number. You will receive a letter containing your Business eFile Number (BEN), your permit number and instructions on how to file and remit taxes. Please allow up to 6 weeks from the time you submit your application to receive your documents in the mail.
Registration through the Streamlined Sales Tax Registration System
Iowa is one of over 20 states that belong to the Streamlined Sales and Use Tax Agreement. Rather than registering individually in Iowa, retailers can register for a sales tax permit in all participating states by completing just one short and simple online application through the Streamlined Sales Tax Registration System.